Indice
One-contracting party exchanges have a multiplier effect on all those elements that in the traditional economy bring about a reduction in the wage share, thus affecting the break-even point.
Outsourcing, especially between affiliated companies, is the key instrument. If a state introduces new laws that allow firms to reduce their economic rights, the corporate group can easily and quickly replace previously hired workers with newly hired workers who cost less. If a waiver is granted from the economic treatment enshrined in collective agreements, outsourcing makes it possible to isolate the added value from the wage share.
If an industry is hit by a crisis, even a temporary one, the group firm can quickly and overwhelmingly pass on market uncertainties to wages, irrespective of the real impact that market downturns have on the group. Or, at the very least, wages fall much faster than in the economic reality.
Multinational group firms therefore enjoy increased elasticity of labour demand. This means that their ability to artificially condition trade patterns can also have considerable consequences on employment trends, i.e. their volatility.
More generally, the impact of globalisation processes on employment volatility is an issue that has been widely addressed in the economic debate, and there are studies that show how both foreign outsourcing and internationalisation of ownership structures – i.e. the expansion of foreign branches – can be considered as contributing to this phenomenon[i].
[i] See among others and also for a summary of studies on the subject, Jaanika Meriküll and Tairi Rõõm, Are Foreign-Owned Firms Different? Comparision of Employment Volatility and Elasticity of Labour Demand, European Central Bank, Working Paper Series, no. 1704, August 2014; on the issue of the impact of outsourcing on volatility, see Paul R. Bergin, Robert C. Feenstra and Gordon H. Hanson, Outsourcing and volatility, NBER Working Paper Series, 13144, in www.nber.org, National Bureau of Economic Research, Cambridge, 2007;